The Art of Survival

Words by: Camilo Smith (Source; pg. 17; March 2008)

As record sales continue to plummet, the record industry adopts a new outlook. But is the plan viable?

O say the recording industry is hobbling is an understatement. It’s got a terminal disease that may have no cure. According to a recent New York Times article, Hip-Hop has been the most ailed. Sales continue to tumble, charting a more than 20% decline according to industry figures from 2005 to 2006. With things getting worse, record companies have had to look at different ways of doing business in the digital age.

Two possible solutions are gaining steam. On the distribution side, companies have begun to open their own digital stores and explore subscription based music services. Furthermore, the labels’s approach to contracting artists is changing into an artist’s recordings (both digital and physical), but also monies from touring, merchandise, publishing and other ventures the artist may take advantage of with assistance from the label.Traditionally, record companies have derived most of their bank from a chunk of CD sales. But with the plastic discs going out of style, other revenue streams have to open up for record labels to stay afloat. “itunes and Rhapsody is really killing them,” says Mickey “Memphitz” Wright, Jive Records’ VP of A&R. It appears that record labels are no longer sleeping on a digital future. “I say in about five to ten years CDs gonna be outta here, man.”

Wright has seen this play out with his own recent signees. Huey’s Jive debut didn’t come anywhere near his digital sales. “On ‘Pop, Lock and Drop It,’ we sold 2 million ringtones, only 300-some thousand albums.

In many ways, 360 deals act as an insurance policy for longer than a year or two, the initial investment made to promote and market the act is balanced by breaking bread on merchandising-like clothing line, or a TV show. Getting a cut of those types of ventures would have meant millions if the likes of multimedia megastar Will Smith or Mogul Jay-Z had once been signed – or would’ve signed – with this thinking. Now labels are banking on this becoming the new template.

“We’re never going to be able to sell as much music as we were ten years ago. But these artists are generating billions,” notes Aahmek Richards, formerly of Def Jam and current president of Trigger Happy Productions, a major music video producer. “Jay-Z alone – you know Rocawear, 40/40 Club, Reebok shoes – all these different opportunities actually came from him being an artist and having a successful music career. So now the labels are like , ‘Damn, we’re creating stars, but we’re not benefiting from it.”